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Avoiding Senior Identity Theft and Financial Scams

October 7, 2015

Each year, more than 12 million Americans have their identities stolen. Of all identity theft victims, the senior population is the biggest demographic affected. According to the 2014 annual report from the Federal Trade Commission, 36 percent of all identity theft victims were 50 or older. The same report stated that 49 percent of the mature market are victims of fraud. The average cost to each identity theft victim is $1,500, but this can be much more depending on what type of theft has taken place. Victims spend an average of 12 hours per incident resolving identity fraud, and the timing of the incident could affect other major financial investments, like retirement.

Seniors are easy victims for these crimes because they are often isolated, lonely, and tend to be trusting. Many seniors also suffer from memory loss or dementia which leaves them even more vulnerable to scams. Seniors are often a big target because they are thought to have substantial amounts of money in their accounts, but even low-income individuals are targeted. Identity theft and financial scams are considered a “low-risk” crime because they are hard to track and prosecute, and often go unreported. The National Council on Aging said financial scams targeting seniors are becoming so prevalent they are now considered “the crime of the 21st century.”

Identity theft occurs when the criminal obtains a senior’s social security number, bank account numbers, or other personal financial documents. There are a number of ways this information can be stolen. Some perpetrators steal credit card and bank statements from the mail, or even go through the trash. Others will contact the senior by mail, posing as a charity, bank, or other well-known company and asking for account information or for the senior to send money. This is also done over the phone. Email scams, or “phishing,” are quickly becoming the most prominent type. Usually the senior will receive an email or visit a website that asks them to enter bank or credit card information to verify an online account. Some thieves have tiny devices that scan card numbers when a card is swiped during a transaction. This is perhaps the most costly form of theft, as it is not usually detected until hours or days later when the thief has spent thousands of dollars.

Identity Protection

As a rule of thumb, seniors can best protect themselves by never giving out personal information over the phone, through the mail, or on the internet unless the senior knows the receiver and has initiated contact. Financial documents, bank statements, and any other documents that contain personal information should be shredded before they are thrown out in the trash. Seniors should be wary of anyone who swipes their credit cards, and should cut up any rarely used or unused cards. To help avoid stolen mail, a senior can have mail delivered to a post office box instead of a home address. Sensitive documents, including social security cards, should be kept in a secure, locked place. Instead of carrying a checkbook, seniors can just carry the number of checks they will need and keep the checkbook in a secure place. A photocopy of a Medicare card can be made to carry, with the first five digits of the senior’s social security number blacked out.

Insurance Scams and Financial Fraud

Fraud is another financial scam that seniors often fall victim to, particularly insurance fraud. Scam artists take advantage of the fact that every senior over 65 qualifies for Medicare, thus eliminating the need to research further for more information on a senior’s private healthcare. Someone can pose as a Medicare representative to get a senior’s personal information. They could also provide bogus services for seniors at mobile clinics and use the personal information they provide to bill Medicare and pocket the money.

Some criminals will go so far as to create fake insurance companies and disappear once a senior hands over the money. Tony Steur, creator of Insurance Literacy, said the best defense is to do thorough research. “Go online and make sure you are dealing with a legitimate insurance company that is licensed in your state,” he said. “Always make your check payable to the insurance company and not to an agent or agency.”

An annuity insurance scam ­– a technique known as “twisting”– occurs when an agent convinces a senior client to invest in an expensive annuity and hold on to it for 10 to 15 years or else pay a penalty for cashing out early. The agent gets a big commission, but the annuity is usually worthless to the senior. “Churning” is when an agent offers a senior a policy that is supposedly better than their existing one. It often costs more but does not hold more value; the senior pays more for the same coverage and the agent collects the commission. It is important for a senior to understand the proposal completely before signing on an upgrade.

Life insurance scams are also popular among criminals targeting seniors. Scammers will loan seniors money to buy a stranger-owned life insurance policy and fake the application process. When the senior dies, the scammer gets the payout. Stranger-owned life insurance policies are not illegal, but defrauding the insurance companies with false information is.

Steuer said that not all scams are blatant fraud when it comes to life insurance and annuities. Many times it is bad advice that ends up hurting the senior. He said the most common situations are ones where seniors are sold products and policies that are not suitable for them. It is important for seniors and their families to watch for red flags that point to fraud. If it seems too good to be true, it most likely is. Some warning signs are if the senior is being pressured to sign on the spot, and is told the offer is only valid if they do. Seniors should watch for high pressure sales tactics or offers that want the money to be sent directly to the agent or a P.O. Box.